The benchmark KSE-100 index of the Pakistan Stock Exchange has outperformed its Asian counterparts, rising by 27% in dollar terms this year, earning it the title of best performing market in Asia.
As to a report by Bloomberg, “The budget lays the groundwork to secure a new loan from the International Monetary Fund [IMF] and one of the cheapest valuations in Asia is strengthening the case for more gains.”
Other benefits included “a stable rupee and easing inflation boosting the prospect for rate cuts.”
Topline Securities, cited in the report, predicted that the benchmark index would probably “further extend gains by 10pc by year-end.”
According to the research, the index was still inexpensive at a one-year forward earnings-based value of 3.8x, which represents a 50% discount to its lifetime average, even though it was trading at a record high.
Bloomberg Economics added that the Pakistan Peoples Party, the PML-N’s principal ally, could “easily walk away in the event of a public backlash to austerity measures taken to fulfill the IMF’s conditions,” which could be sufficient to “topple the government,” but that the country’s stock market remained vulnerable to political instability due to the coalition government’s weak mandate.
In the past, the nation increased tariffs on sectors including steel, cement, and autos to comply with IMF requirements.
The research stated that in order for the nation to pay off its about $24 billion in debt in the upcoming fiscal year, the IMF program is essential.
On Thursday, the “14-day relative strength” measure of the benchmark index crossed the 70,000 mark. “That is typically seen as representing overbought levels, raising the prospect of a correction,” Bloomberg continued.
